OPINION - This was a competent Budget, but it may not be enough
Jeremy Hunt faces huge problems but the Chancellor has little money to work with and his party is bitterly divided. Writing a Budget under such circumstances is not an enviable job.
Britain has many issues: we are living through a stagnation in living standards that began with the financial crisis of 2008/9. The Office for Budget Responsibility (OBR) forecasts that living standards will fall by almost six per cent over the next two years. Meanwhile public services, particularly the NHS, water, sewage, rail, schools and the courts — are deteriorating.
The Chancellor has limited room for manoeuvre on all this: a weak economy means lower tax revenues. Worse, there are still shadows cast by the financial crisis and Covid, which has left us with government debt at around 100 per cent of GDP.
Hunt chose to duck the issue of public services. He announced nothing new — so there is no end in sight for strikes in schools and hospitals. The rise in defence spending, from two to 2.5 per cent of GDP, would further limit cash for public services.
I have grave doubts about his attempts to address the post-Covid rise in inactivity. Parents of children aged nine months to two years old will in theory be able to claim up to 30 hours of free childcare. But the funding allocated looks thin and there is no plan for how providers will be found. The roughly £1bn thrown at cutting taxes for high-earning pensioners is unlikely to persuade many who have left the labour force to return. A three-year tax cut for business investment is dismissed by the OBR as likely only to bring forward investment that would otherwise have happened later.
The bigger picture is, of course, that the Conservatives have put the disaster of September 2022 behind them. This is a normally dysfunctional UK budget. There are shadows of Liz Truss — the tax cuts for rich pensioners, the investment zones that will shuffle business from one part of the country to another.
But most of it is gone and we can welcome a more normal state of politics and economics. The big problem for Hunt and Rishi Sunak is — is normal good enough any more?
Tony Yates is an economist